Summary

On April 13, Tesla CEO Elon Musk tweeted an acknowledgement that Tesla had over-automated its production lines and underestimated the value of human workers in auto assembly.

This revelation was unsurprising to auto industry experts, who have been making that very observation for years.

Musk has been a champion of ever greater automation and the “productizing” of vehicle manufacturing facilities; the reversal of tone goes back on years of statements.

With the supposed increased efficiency and margin improvements from full automation no longer on the cards, Tesla’s future looks increasingly bleak.

Elon Musk, CEO of Tesla (TSLA), made a big admission on the afternoon of April 13th. Apparently channeling the Friday the 13th horror spirit, Musk announced via tweet that the electric car manufacturer had over-automated its production process:

“Excessive automation at Tesla was a mistake. To be precise, my mistake. Humans are underrated.”

The tweet was a follow-on from an interview with CBS that aired Friday morning in which Musk talked about gutting much of the overly complex Model 3 assembly line:

“We had this crazy, complex network of conveyor belts….And it was not working, so we got rid of that whole thing.”

This admission represents a major reversal of virtually everything Musk and his team at Tesla have been saying about the Model 3 production process. And it signals a death knell for the Tesla bull case that ought to send prudent investors running for the hills – or taking up a short position.

Let’s talk about the various consequences of Musk’s admission:

“Productizing” the Factory Proves a Daunting Task

Gallons of digital ink has already been spilled on the subject of the beleaguered ramp-up of Tesla’s first mass-market vehicle, so there is little point in recapitulating all the problems that have occurred – and continue to dog the process. All that need be said to provide context for this article is that the ramp has still failed to hit its end-of-March production rate target of 2500 Model 3s per week, and that Musk claims to still be sleeping on the factory floor in order to deal with the continued issues.